REPUBLIKA.CO.ID, JAKARTA -- Bank Indonesia (BI) has predicted that the 2014 inflation rate will increase to 7.7 to 8.1 percent, which is higher than the government-set target of 7.3 percent.

"The subsidized fuel price hike will contribute around 2.4 to 2.8 percent to the inflation rate," BI Deputy Governor Perry Warjiyo said at a press conference here on Tuesday (18/11).

Almost half of the extra inflation rate of 2.4 to 2.8 percent will be a result of the subsidized fuel price hike, he added.

"Shortly after the prices of subsidized premium-grade gasoline and diesel oil were raised, the inflation rate increased by 1.3 percent," Warjiyo stated.

The BI official further noted that an increase in transportation fares, which is an indirect impact of the subsidized fuel price hike, will lead to an inflation rate increase of 0.7 percent.

If the transportation fares are kept in check and do not soar to rates as high as last year's, the inflation rate will be lower, Warjiyo affirmed.

He also pointed out: "Inflation rate of 0.6 percent will be caused by a hike in the prices of food and related services. This can be contained if the inflation expectation is anchored, food supplies are available, and distribution is good."

On Monday night, President Joko Widodo decided to increase the price of subsidized fuel, including premium-grade gasoline, from Rp6.5 thousand to Rp8.5 thousand per liter and that of diesel oil from Rp5.5 thousand to Rp7.5 thousand per liter.

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